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Jan 05, 2010 (LBO) – Sri Lanka’s Central Bank intends to monitor more closely banking sector group companies to improve its supervision of financial institutions, Governor Nivard Cabraal said. The move is part of several measures being taken to better regulate the financial sector after several institutions, both regulated and unregulated, got into trouble in the last two years.

The Central Bank will introduce measures to start ˜consolidated supervision’ of banking groups, Cabraal told a news conference held to announce the regulator’s policy framework for this year.

The regulator will undertake a group-wide approach to the supervision of licensed institutions, Cabraal said.

This will allow the conglomerates to benefit from economies of scale, but at the same time, ensure that diversified risks are properly managed.

The Central Bank action is seen as a move to prevent regulated bank subsidiaries from going into risky areas of business and getting into trouble.

Last year, the Central Bank took under its control a private listed bank and several finance companies and subsequently placed them under the management of state banks and appointed new boards

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